Posted on 05/13/2003 9:04:54 AM PDT by stainlessbanner
SAN FRANCISCO - Electronic Arts, the video game publisher, said today that it would not make online versions of its popular sports games available for Microsoft's Xbox game console for at least a year, signaling a failure of more than two years of negotiations between the companies.
Executives at Electronic Arts, which is based in Redwood City, Calif., said that they were worried that Microsoft was seeking to gain greater control over their customers who participate in online games on the Xbox.
Instead, Electronic Arts, the nation's leading computer game maker, planned to announce on Tuesday a one-year exclusive arrangement with Sony to make up to nine sports games available for online play using its console, Playstation II.
Compared with the millions of people who play computer games, the world of online gaming is now relatively small with only 600,000 Sony customers and about 500,000 Xbox customers using Internet connections to compete against one another.
But the long-term implications of Electronic Arts's decision are potentially significant, given that Microsoft's effort to break into the console business depends on its ability to persuade publishers to make games for the Xbox.
Moreover, the world of online gaming is expected to be the business's next frontier, conceivably enabling the makers of consoles and video games to charge players continuing subscription fees.
The deal between Sony and Electronic Arts, which was disclosed today in The Wall Street Journal, is scheduled to be announced on the first day of the E3 Expo, the annual video game trade show that starts Tuesday in Los Angeles.
John Riccitiello, the president of Electronic Arts, said today that he favored making games for Sony Playstation Online because the business arrangement would allow him to maintain "a closer relationship with customers."
Sony, he said, is allowing Electronic Arts and other game makers to establish the online environment where the action takes place, control them on their own computer servers, and dictate subscription fees.
Mr. Riccitiello said that Microsoft wanted players to log into and play within a virtual world controlled by Microsoft and operated by its computer servers. "They're in a position to unilaterally change the price and do whatever they want to us," Mr. Riccitiello said.
But Robert J. Bach, the Microsoft executive in charge of its Xbox operation, said that Electronic Arts and other publishers would have control over pricing, subscription fees, and game play under its planned approach.
He said that game players who used the Xbox Live system would do so over the Microsoft infrastructure, within an Xbox Live environment. But he said that was not fundamentally different from traditional game-playing where publishers like Electronic Arts make games that are then played on Xbox hardware.
"The business model is exactly the same way as today in the hardware world," Mr. Bach said. Just as Microsoft invested in building the hardware platform, he said, "likewise, on Xbox Live we're creating all the infrastructure, billing and security."
But Mr. Riccitiello said Microsoft's aggressive business tactics reminded him of its past efforts to dominate the Internet browser market, which led to an antitrust suit that Microsoft settled after a long trial.
Mr. Riccitiello said he worried that Microsoft would fold games into Xbox Live and make game publishers subject to its business decisions.
"That's why we're nervous," he said. For Electronic Arts to change its position, he added, "Microsoft is going to have to change their business model."
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